Should ECB Kill the 500-Euro Note?

Spaniards used to call €500 notes “Bin Ladens.” Everyone knew the big denomination bills existed, the joke went, but no one had ever seen them.

Now, Bank of America analyst Athanasios Vamvakidis is arguing that the European Central Bank should do a Seal Team Six and exterminate these controversial bills, the biggest denomination notes among the so-called G10 major currencies. Doing so, he argued in a research note released Tuesday, would weaken the euro, provide an economic boost, and allow the ECB to pull a fast one on gangsters who often park their ill-gotten wealth in these bills.

There’s no indication that the ECB would follow Mr. Vamvakidis’ advice. ECB President Mario Draghi told European Parliament Member Nikolaos Salavrakos in a letter last year that the central bank has no plans to do away with them, arguing that “high-denomination euro banknotes fulfill an important role as a store of value.”

But according to the BofA analyst, the “store of value” mindset is precisely the problem with the €500 notes. The evidence, Mr. Vamvakidis notes, is that the mega bills end up as “mattress money,” rarely seeing the light of day and existing as an alternative vehicle for holding savings. An ECB study itself suggests that only one-third of these notes in circulation are used for transaction purposes.